Forums / Property Investing / Creative Investing / Renting out separate rooms

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  • Profile photo of CradleCradle
    Participant
    @cradle
    Join Date: 2013
    Post Count: 11

    I would like to buy a property in sydney that myself and other family members can stay in on occasion. does anyone know if there are any complications if I buy a two bedroom place and rent out the other room while keeping one for occasional use?

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,681

    The person becomes a border in reality. It can be dodgy as its easy for them to skip out. The other option is to rent to them and sub rent back a room (at whatever price if any) as when its needed The rental deal would be difficult to describe in a complying(state rental law) contract I would imagine.

    You could also become joint tenants in your own place?? Thinking out loud here.

    Profile photo of CradleCradle
    Participant
    @cradle
    Join Date: 2013
    Post Count: 11

    Hmm thanks for the interesting options. Sounds like I would need to find a pretty cooperative tenant! Is it possible to be a tenant of your own place?

    Profile photo of fragarcolinfragarcolin
    Member
    @fragarcolin
    Join Date: 2013
    Post Count: 16

    For this you must ask your tenant and further if he has no problem with then you can think more.

    Profile photo of Enid77Enid77
    Member
    @enid77
    Join Date: 2013
    Post Count: 2

    Buy a place and rent out the spare rooms on a short term basis on something like AirBnB so when you aren't there both rooms make money. Could be issue if the place is strata but if it's your own house would be okay. 

    Profile photo of fragarcolinfragarcolin
    Member
    @fragarcolin
    Join Date: 2013
    Post Count: 16

    Good idea Enid.

    Profile photo of SeanWilsonSeanWilson
    Participant
    @seanwilson
    Join Date: 2013
    Post Count: 26

    I know that in Logan City Council you can actually rent out on separate leases if you have an 'annexed unit'. Speak to some town planners in Sydney to see if this is possible in your local government area.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Basically you can do what you like- rent it, stay in it, rent a room. BUT what is illegal is doing one thing and saying you are doing another to claim tax breaks.

    You can be a tenant in your own place (but you are not called a tenant). It may be deemed as your PPOR.

    You can only claim one property as your PPOR. So you can't claim tax on it if you are not renting it out at market rent because you are staying there. 

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    Main issue I can see is how 'Capital Gains Tax' will be calculated when it comes time to selling

    Usually with PPR you can claim 50% CGT if you have held the property for at least 1 year

    However, renting out spare bedrooms, may mean that the property is no longer considered 100% PPR

    And this could mean you may not be able to claim 50% CGT on the full value of the property

    Best to speak to an accountant about this, and about other issues like whether you can claim certain costs and depreciation

    Profile photo of BoughtWithEquityBoughtWithEquity
    Participant
    @boughtwithequity
    Join Date: 2013
    Post Count: 68

    I don't know the tax issues over in Australia but as a life long investor in the US,  I completely switched to renting rooms in a shared housing concept back in '09.  The headaches of renting to families in my market wasn't worth the paltry returns and eviction costs.  We partner with other investors to now buy off-market properties, fix them up enough to rent, furnish the shared area and rent the rooms separately.  It works very well in the metro Atlanta market.  Our investors do well with 10% returns and we make out nicely as well!  You will minimize vacancy, minimize repairs & repaints, minimize legal costs and maximize the returns.  It can be a headache initially getting the property rented and stable but the returns make it worth the effort!

    Profile photo of Henry AdamsHenry Adams
    Member
    @henry-adams
    Join Date: 2011
    Post Count: 105

    Exactly, so in this case just use Cash-In-Hand technique, untraceable by ATO and well proven method for majority of the land lord in overcrowded Sydney CBD apartment complex.

    Profile photo of BoughtWithEquityBoughtWithEquity
    Participant
    @boughtwithequity
    Join Date: 2013
    Post Count: 68

    It's actually worked so well for us that we created a business model around it and now create shared housing around the metro atlanta area market.  We also have been taking in empty investor homes and doubling or tripling the net return by renting the rooms and furnishing the common areas as shared space.  It's an effort to rent/manage but the returns make up for it….plus the increase in paper wealth when applying a cap rate against net rents.  We are looking to move into other US cities as well….Happy Investing!

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